The global pandemic has tested every facet of society over the past year, exposing its pressure points like never before.
It is no surprise therefore that the huge challenges facing council finance officers have only grown with the arrival of COVID-19.
Income has been slashed by a series of lockdowns, expenditure has risen as demand for services has soared, and the looming prospect of a recession is throwing into doubt business rates and council tax levels.
‘We run the gauntlet every year, but this makes everything even more uncertain than normal,’ said Tracie Langley, Section 151 officer at Cornwall Council.
‘We can’t rely on commercial income as much as we have done in the past and we have no idea how our businesses are going to survive.
‘We have a really ambitious council that wants to do fabulous things for the community. I have to say: “You can’t do that, we have to do this instead”.’
The sector has been thrown a lifeline in the form of Government grants that have helped stabilise the finances of some, but by no means all, authorities.
But again, this has exacerbated existing problems in local government funding.
Director of finance at Oxfordshire CC, Lorna Baxter, estimated her authority’s support for COVID-19 pressures had come in the form of between 15 and 20 grants.
Ms Baxter, who is also president of the Society of County Treasurers, said: ‘When you’ve got a lot of grants some can be carried forward, some can’t. It’s another bit of work to add to the fact we have to do returns and make sure everything is aligned with terms and conditions.
‘Reporting this has been quite difficult, it takes up quite a lot of time – we’ve had to recruit additional staff to collect information on infection control, for example.’
Balancing a budget on short-term grants, which are often ringfenced, is not a new problem.
Chartered Institute of Public Finance and Accountancy associate director Andy Burns said: ‘What councils have had is a series of piecemeal bits of money. Because councils haven’t had the certainty of knowing how much they will get, it has made financial planning very difficult.’
Long-overdue reforms in areas such as social care, business rates and fair funding have been ‘constantly kicked into the long grass’ by successive Governments.
He explained that those setting budgets were left with an unedifying choice of whether to ‘put off making difficult decisions’ or ‘make a tough decision you didn’t need to make’.
‘There’s no substitute for proper, long-term planning certainty,’ Mr Burns added.
Ms Baxter agreed: ‘You have to make assumptions. If some don’t continue, every county council would fall over, so most will make the assumption they will continue.
‘One of my biggest frustrations is with the direct social care precept,’ she added. ‘Children’s social care is just as legitimate in terms of additional costs.’
A second successive one-year Spending Review is a bugbear for most finance officers, albeit with the understanding of the level of uncertainty as a result of the pandemic.
Ms Baxter said: ‘It’s unhelpful in terms of managing our budgets – having certainty over the medium-term would be helpful even if it’s not as much as you hoped for. I’m hoping the next Spending Review will be a three-year review.’
Solace’s finance spokesman, Martin Reeves, agreed that a long-term solution to replace ‘one-off funding pots’ was crucial.
He said longer-term, more flexible funding enabled councils to invest in prevention and early intervention, whereas short-term grants served to ‘undermine strategic planning and have an extremely limited impact on tackling the root causes of the issues they seek to address’.
Professor Reeves said: ‘Solace has long campaigned for a sustainable, multi-year funding settlement for the sector and this will be all the more important as we continue to respond to, and seek to recover from, the coronavirus crisis.
He added: ‘The pandemic has further exposed, and entrenched, inequalities in our communities and if we are to truly tackle them while ensuring our economies bounce back we will need sufficiency, certainty and flexibility over our finances.
‘Anything short of that will just make it harder for us as a country to massively improve peoples’ life chances and jump-start our economy.’
Aileen Murphie, director of the Ministry of Housing, Communities and Local Government and local government value for money at the National Audit Office, went further, making the case for a four-year review: ‘The need for a four-year spending round is never more than now.
‘The longstanding issues for local government are still there – it’s not good enough to say it might be next year – it might not.’
At a Local Government Association finance conference earlier this month, chairman Cllr James Jamieson spoke of a ‘fragmented and opaque system of council funding’ currently in place.
‘A long-term, sustainable funding is still needed,’ he said.
‘The appetite for local government to have a conversation is pretty high – the question is about HM Treasury.’
